The MD also seeks relaxation in asset classification in view of COVID-19
Aditya Puri, the managing director of HDFC Bank, has called for interest rate cuts from the Reserve Bank of India, apart from a relaxation in asset classification for bad loan recognition, to fight the economic losses caused due to the spread of COVID-19.
In a teleconference with the media, the chief of the largest private sector lender also allayed concerns over asset quality, particularly of the unsecured portfolio, raised by some analysts, saying most of the lending was to highly-rated entities.
“Asset classification, in my view they [RBI] don’t have a choice. Again on fiscal stimulus, they don’t have a choice,” Mr. Puri said.
Banks have to classify a loan as sub-standard if repayment is due for more than 90 days and there is a demand from the industry to extend the default date to 180 days.
“Total unsecured portfolio is 16%, 6% is cards and 10% is personal loan. 75% of personal loan is to top-tier clients. So, there is no reason to be worried,” Mr. Puri said.
On the small and medium enterprises portfolio, he said 80% of the bank’s exposure was covered by additional securities.
“NPA here is in the 2% range, maximum. It is a granular portfolio where we have 85% self-funding, which means 85% of the people we have lent to are self-funded. It comes across reasonably tough credit standards,” he said.
He said the bank had recently tightened internal norms for credit appraisal.
“You have to look at the cash flow, you have to see if certain people have the ability to bear the strain. That we have [done] a month-and-a-half ago. Our existing portfolio is showing no strain. Rejections rates are higher [after norms were tightened],” he said.
He also said the bank had an excess liquidity of $5 billion which was benefiting the bank as it was deployed in government securities where yields were softening.
He also said about 40% of the bank staff were isolated due to the spread of COVID-19, including the senior management.
With Mr. Puri retiring from the bank in October this year, the bank has started to look for his successor and has appointed a search committee. Mr. Puri said the names were ready and the search committee would announce them shortly.
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